If you read any of the mortgage news at the moment, it would seem that to mis-quote Meghan Trainor, “It’s all about the price, ‘bout the price”. 2015 kicked off with some lenders doing their absolute damndest to scoop up business by cutting rates to record lows – not just for two-year deals but also three, five and 10-year offerings. Looking at some of the figures coming out from lenders regarding their 2014 volumes it was perhaps no surprise.
News that HSBC, for example, had seen a 21% year-on-year drop in overall lending appears to go a long way towards understanding why the bank has been aggressively cutting rates and why it decided to commit the mortgage market u-turn of all u-turns last year by opening up itself to brokers – albeit (so far) in a limited capacity. Judging by these latest lending figures however I can’t help but feel that before too long it will be offering its products via all intermediaries.
But, certainly lenders have been quick to slice and, if borrowers are in a position right now to remortgage, and haven’t done, then you have to question what sort of environment would be right one for them to do so. Even with the potential chance of further cuts – especially if we see a cut in Bank Base Rate as alluded to recently – I suspect that we are only going to be talking about potential savings in the tens rather than hundreds of pounds. For those who are willing to commit, those longer-term deals will surely seem incredibly appealing.
So, with all this talk of price cutting I can’t help but turn to the conveyancing market and wonder whether this approach will filter through to the solicitor firm? For the most part, I have believed that conveyancing prices are much more likely to increase rather than fall as solicitors seek to regain some of the margin which has been lost in recent years given they cut prices in order to retain business. But, the obvious question, must perhaps now be asked, if our lender partners are feeling the need to cut in order to bring in the requisite volumes, will conveyancers/solicitors feel they have to following a similar path?
The initial soundings from our panel firms at least are that price cuts are not on the agenda – the overwhelming feeling is that pricing is at a level which can provide the requisite margin but any further cutting means the business income generated may not be covering all the costs. Perhaps the only way you can cut prices and keep margin is to impact on the service levels and, quite frankly, no solicitor firm worth its salt currently wants to do this.
Service of course is absolutely critical in the conveyancing market, particularly when you are dealing with brokers who have recommended the service to their clients. Cheap pricing does not automatically mean cheap service but when price is cut, business can flow in at a rate of knots which means the service does suffer. Getting the balance right, and ultimately being able to react quickly should that balance shift is all important and certainly the solicitors on our panel are highly experienced in being able to offer the best of both worlds, competitive pricing and quality servicing. Anything else isn’t going to get you off the starting grid.
But, as always, this market is a moveable feast. Lending levels dropped off in January and, while the outlook is for transaction levels to pick up, we have a General Election in May which might mean the brakes go back on in April. Soon, regardless of Election result, we will be into the summer and perhaps looking for a really strong Q3 and Q4 to put the fire in our bellies again. I suspect that Q4 will be extremely busy but we are seven months away from then and therefore we shouldn’t rule out ongoing pricing reviews across the board if volume levels do not hit the heights that we expect of them. Whatever happens, 2015 is shaping up to be a very interesting year.
Harpal Singh is managing director of BrokerConveyancing.co.uk